Indonesia: Investment uncertainty, false promises or new beginning?

 

JAKARTA — The Ministry of Environment and Forestry (MoEF) stated that it will guarantee the continuity of the business of PT Riau Andalan Pulp and Paper (RAPP) after the company commits to revise its Business Activity Plan (RKU). The MoEF Secretary General, Bambang Hendroyono, said that the RKU will serve as business guidance for 10 years – until 2026. The MoEF will provide an opportunity for RAPP to complete its RKU by 30 October.

Whereas this sounds swell on the surface, the investment community has taken note. Under the Jokowi administration and his executor, the Minister of Forestry and Environment, Siti Nurbaya Bakar, agreements between the private sector and the government have proven to be meaningless. This is the message of the minister. An investment fund manager opined on social media, “This is a good beginning, but regaining the lost trust in the administration will take a long time.”

Production and investment forecasts are impacted, budgets need to be re-written, and the cost configuration of the industry needs to be re-evaluated. Growth will be halted, employees will be retrenched. The GDP will be hit by another percent and move into negative territory. This “green” fantasy, combined with populist politics, hits the stomach of the ordinary Indonesian citizen and his families. But the NGOs are rejoicing.

Already an underperforming industry, this latest policy gaffe threatens about 100,000 employees in Riau and goes beyond the actual employees in the company. The secondary economy will be hit hard. This includes street food sellers, suppliers, transportation services, medical clinics, traders of daily goods, mechanics, and the thousands of other individuals who drive the local economy.

The Minister of Forestry was quick to blame PT RAPP for the unrest that followed, but workers union officials saw the rice bowl threatened by policies that are generally perceived as foreign political agendas supported by an out-of-touch Ministry of Forestry. Indonesians did what they know best: go to the streets to apply peoples power and paralyze the city. For the first time, a public revolt against the environmental policies of Jokowi hit the streets in Riau.

“We will defend our jobs for our union members,” said Hermanto, a Union member attending the demonstration in Pekanbaru in the Indonesian province of Riau. “Talk is cheap by the minister, she does not have to feed the families of our workers,” Hermanto said. Other national unions agree with the demonstrators.

Despite the language of blaming PT RAPP, owned by the controversial, self-made billionaire Sukanto Tanoto, the ministry made some concessions, sources close to the ministry said. The industry, labor unions, employees, investors, and NGOs are watching closely as the future is uncertain.

The language of the work plans as “business guidance” shows more ambiguity, uncertainty, and questionable policy. Many argue Jokowi’s agrarian reforms are giving 8 million ha away at the expense of homegrown Indonesian companies like the APRIL group.

Whereas the administration claims this is to empower local communities, many political observers see Jokowi’s action as democratic vote buying for the upcoming regional and presidential elections in 2019. So Jokowi presses ahead with his radical reformation agenda. The last time a similar call by the left was made was in 1963 when left-wing radicals demanded land reform.

The tussle over PT RAPP’s work plans is rooted in World Wildlife Fund (WWF) and Greenpeace plans of evicting industrial plantations from what is perceived to be a critical nature reserve. Greenpeace copied its campaign against PT RAPP and other APRIL businesses from its 1998 Amazon campaign, while WWF plans to create a massive Kampar Nature Park, without any input from industry. This plan includes concessions owned by PT RAPP’s competitor, Asian Pulp Paper (APP).

The “green” campaign is being executed by a cabal of shadowy US and European NGOs, WWF Japan, and Finnish-funded local groups, which Indonesian State Intelligence officials dubbed, “Agents of foreign NGOs threatening the unity of the Indonesian Republic.” Diplomatic contacts interviewed for this report do not rule out a banning of foreign NGOs. Like India, diplomats predict the Indonesian government will respond once the full impact is felt by the Jokowi administration economic performance is affected. The Indonesian reaction is usually “5 minutes past 12,” once the disaster becomes apparent, one diplomat said.

Members of a WWF-funded local “environmental” group were rumored as being associated with a gang who murdered a contract worker in 2011. This group called for separating from Indonesia during their campaign. Indonesian officials declined to comment on the links between extremists and NGOs, but acknowledged the increased threat by non-state actors.

A recent plan to incorporate WWF in a joint secretariat to assist in the agrarian reform caused a huge scandal in Jakarta. After widespread resistance on social media, the Minister of Forestry quickly U-turned on the idea and the agreement with WWF was canceled.

Despite APRIL having had a 25-year agreement with the government, the dispute overshadowed the growing concern over foreign influence peddling in the affairs of Indonesia. The Minister of Forestry euphorically supported cleaning up the forestry industry and has accepted the NGO narrative presented by former NGO members now in a cabinet function.

Whereas her efforts may be laudable, the economic reality will negatively impact Indonesian economic performance. The previously carefully managed concessions by PT RAPP are now open to illegal loggers. NGOs monitoring the situation already report an increase in local communities no longer kept in check are restarting illegal logging operations.

Claims about the peat swamps are equally inflated. A critical examination of the much-quoted Deltares report discovers, for example, the sample only consists of 15% of the area of interest. “Basing an academic study of this significance on an 85% error of margin is questionable science,” responded one academic when asked about the quality of the study.  The study was commissioned by Wetlands International and funded by the Climate Land Use Alliance (CLUA) and the Norwegian NORAD.

The CLUA first surfaced in a U.S. House-Senate report in 2014 as being an agent of influence to the U.S. government through the Environmental Protection Agency. The CLUA was also named by Indonesian intelligence officials in a recent joint briefing. Questions have arisen suggesting the science used by NGOs for political purposes is harming the Indonesian economy. These questions are not without merits.

For example, CLUA funded Greenpeace Inc. with 1 million US dollars “to support continued work on campaigns and commodity market pressure to end …..palm oil expansion in Indonesia…”  Another 1.4 million US dollars in total was dispersed for the same purpose for additionally two years, expiring in 2017. The Norwegian Rainforest Fund received about 500,000 US dollars from the CLUA. Climate Advisors and the CLUA are examples of excessive foreign meddling in Indonesian internal affairs.

One grant of 186,000 US dollars stands out as named, “to support a World Economic Forum Global Agenda Council on Deforestation to identify meaningful targets for sustainable supply chain management in four key commodity supply chains (beef, soy, palm oil, paper and pulp). The Indigenous Peoples Alliance of the Archipelago (AMAN) received 400,000 US dollars from the Ford Foundation, which is part of the CLUA. The actor Harrison Ford’s production of the “Years of Living Dangerously” pocketed 400,000 US dollars in grant money from the CLUA.

The recently much quoted World Resources Institute (WRI) received another 1,032,585 US dollars from the CLUA. Yale University is being used for “supporting The Forest Dialogue’s Free Prior and Informed Consent (FPIC) initiative.” FPIC aims to change constitutions to embed a highly controversial and legal questionable doctrine.  Yale received 20,000 US dollars for its time and efforts. The Environmental Paper Network (EPN) received 150,000 US dollars in support of myriad NGO networks. This particular funding expired in March 2017. The campaign against Indonesian interests continues.

The evidence of foreign influence on Indonesian policy decision-making processes is evident by the bucket full of dollars spent targeting Indonesian industry. Administration officials express in private the concerns that foreign NGOs are expected to target state companies, which are riddled with corruption, inefficiency, and community conflict. These fears are shared by competitors alike. For the moment, the administration is picking on the favorite black-sheep instead of critically examining the NGO narratives to get a “feel-good” quick fix.

The in-use LiDAR surface radar readings are equally flawed. The technology in use and referenced by the Peatland Restoration Agency (BRG) is the first generation technology. The resolution is unable to differentiate details. The Deltares presentation warned about the limitation of the study and the technology in use.

The ministers quoting of the World Bank study show questionable narratives. Combining the 85% not examined and using old technology and wrong readings of the World Bank study, it begs the question if the Jokowi government is using these points for political expediency rather than rational reasoning or scientific accuracy.

Executives of PT RAPP are stunned about the insistence by the administration. The threat of hostile reactions by local communities was known to the ministry in meetings leading up to the demonstrations. Claims by the ministry of “socializing” the new policies lack the consensus of the governed. Managers from APP attending the minister’s socialization efforts described the events as, “a foreign NGO bonanza, lacking cohesion or reality.” The rejection by the communities was a predictable outcome.

With the removing of the only credible income source for the 500,000 – 900,000 community members snarls at the Jokowistic “fishing and basket weaving” economy.  For example, Sago, promoted by the NGOs as an alternative economy was the emergency food used during the Japanese occupation while Indonesian starved. Today, this industry is dominated by a local “mafia,” which uses the NGOs to protect their interests.

One of the so-called activists with interests in the sago business surfaced in Riau diring the presidential visit and received a bundle of cash. He later surfaced at the COP 21 meeting in Paris. But funding by ClimateWorks, a spin-off of CLUA and part of the funding network, showed 44,005 US dollars for the presidential “blusukan” visit by President Jokowi was provided by the CLUA and raised questions about influence peddling by the American donors.

Source: Climate Land Use Alliance, page 19

Other NGO activists continue to pursue land claims for their personal interests and want to see the PT RAPP removed. “Is the minister wittingly playing into the hands of these interests?,” one academic at the University of Riau asked. Many think she is.

PT RAPP, as many other large corporations do, allocates large community development programs to the areas in which they operate. Lights, roads, schools, and medical support are often provided by the companies in absence of the government fulfilling its obligations. Employment has steadily decreased and almost eliminated illegal logging. PT RAPP is, in this instance, no exception. Twenty-five-year contracts lay out strategic plans and major investment decisions. This has now all turned on its head and caused uncertainty over whether the Jokowi administration can be trusted.

The NGO pipe-dream to create another mega national park lacks any economic scalability. Unemployment is certainly on the rise and communities will unlikely choose to “protect” the forests at their own famlies’ expense. NGO claims so eagerly regurgitated by populist politics lack any evidence. An increase in poverty and a decrease in purchasing power is expected. Even the Minister of Forestry herself stated the “social forest” concept is not realistic.

The ministerial public statement also highlights the next problem. The industry is not receiving an immediate replacement and will receive a maximum of only 15,000 hectares per annum, maybe next year. In other words, the Ministry of Forestry fumbles again and ensures a slow growth of the industry.

And the NGOs rejoice on the news. The rather simpleton narrative of the foreign NGOs is based on the idiotic conclusion that halting the production of companies like APRIL or APP will “save the planet.” The reality of the companies having replanted and reinvested in nature for five decades is lost as the NGO fake news prevails in the debate.  But as court records show, the science behind the claims made by foreign NGOs lack any evidence.

In a Greenpeace attack piece against APRIL claiming tigers are being killed, in the footnotes, Greenpeace stated, “That the actual number of wild tigers is difficult to ascertain.”  Agreed.

APRIL must be commended. Anyone in his right mind would terminate their investment commitments to Riau and Indonesia, move their business to countries with a better and more trustworthy legal framework in which the government stands to its agreements, and leave the government to sort out the mess the Jokowi administration and the Minister of Forestry has created.

The current pro-foreign NGO policies in implementation harm the people, the economy, and the environment. This gives reason for serious concern for not only the paper industry, one of the engines of the sluggish Indonesian economy, but sets the tone for other foreign investors that deals struck with the current administration may not be honored.

A political observer familiar with the “green” wars waged by foreign NGOs stated, “If you have ‘Green,’ ‘peace,’ ‘people,’ or ‘democratic’ in a sentence, you can assume they are not green, peaceful, for the people or democratic.” This somewhat cynical statement referred to activists identified as being linked to foreign activists such as the US-based Rainforest Action Network (RAN), which was identified by officials as a foreign NGO targeting the unity of the Republic.

By Joshua Simmons, Rebecca Cummings, Hardianto (Riau)

 

 

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